We were looking at the downtrend in early February.
Let’s see what happens next.
It can be seen that the downtrend was not the start of anything bigger. Before hand there was an uptrend, and afterwards the trend is upward as well. This downmove was likely a correction and not part of a healthy new strong trend.
Figure 8 - The EUR/USD analysis zooms out to show the long term context.
- Wavy uptrend: With the start of March volume picks up. Down moves come on decreasing volume and the upswings come on higher volume. Volume ebbs on Easter.
- After the Easter holidays, price heads up again on increased volume, starting a fast paced uptrend. At first volume decreases in divergence from the price action which could be construed as a warning sign. The smaller ranges here mean investors are unsure that the wavy uptrend is over. However, volume starts picking up as price continues heading upwards meaning traders are getting on board the trend.
- Volume gets higher as price increases reaching and going past 1.2900. The torrential uptrend comes to an end with the appearance of a huge red candle. There is high volatility and large ranges (though decreasing volume) as investors try and figure out which way the next price movement will go. There is a drop of volume for Memorial Day.
- Traders are still uncertain and battle further. Once price reaches resistance from the last high at 1.2900 there is a correction. Fundamentals shift here as the Fed sounds very hawkish due to high inflation numbers. The move downwards happens on increased volume.
- Then it cools and so does volume. The rest of June has a downward trend in volume because of uncertainty and traders waiting on the FOMC meeting coming that week. The announcement from the FOMC meeting on June 29th went against the markets expectations and the result was a sell off of Dollars on increased volume.
